Understanding Factors Affecting Consumer Purchase Decisions for Functional Foods By Ratapol Teratanavat Dr. Neal H. Hooker Presented at the IFT Meeting, Las Vegas, July 12-16, 2004 Department of Agricultural, Environmental, and Development Economics

Background  Increasing concerns/interest in diet-disease relationship  Little evidence of improvements in eating behavior or food choice selection  Investment decision for food manufacturers – high cost of R&D  Consumer demand and key factors affecting purchase decisions for functional food???

Objectives  Examine consumer valuation of key attributes of functional food  Health benefits  Identify market segmentation based on consumer characteristics  Motivation, health knowledge, concern and awareness  Demographics

Model - Choice Experiment Model - Choice Experiment  Similar to conjoint analysis  Hypothetical situation  Consumers evaluate different product attribute combinations and select one they prefer  Choice decision explained by product attributes and consumer characteristics

Specific Functional Food Product  Tomato juice containing soy protein - synergistic effects of two functional benefits  Multidisciplinary project funded by USDA  Key attributes  Health benefits from lycopene and/or isoflavones  Organic Ingredients  Source of nutrients: Natural vs. Fortification  Price

Check the box above the product you most prefer □ □ □ □ Conventional Tomato Juice Tomato Juice Plus Rich in nutrients that may reduce the risk of prostate cancer Tomato Juice Plus With Soy Rich in nutrients that may reduce the risk of prostate cancer and heart disease I prefer none of these products Conventional ingredients Organic ingredients Fortified nutrients Natural $3.00$3.50$4.00 Example of Choice Scenario

Data  454 Households – Ohio Survey Data  51% - Female  94% - Caucasian  Age: Mean = 54 years old  Annual Income: Average range = $50-75K  Each respondent received 4 choice scenarios

Importance Scale of Various Food Attributes

Effects of Product Attributes on Choice Decision

Estimated Willingness to Pay Base product: Conventional Tomato Juice at $3.00 for 6 cans (8oz.)

Effects of Consumer Characteristics on Choice Decision (Household Data) Note: Family history of cancer and heart disease and current consumption of health and organic foods do not have significant effect.

Conclusion  Taste and price are still key attributes  Consumers value and are willing to pay more for health attributes  Demographics and health concerns influence choice decisions  Future analyses - Complete set of Ohio household data For more information, please contact Ratapol Teratanavat at